It seems the only things discussed these days in financial publications are interest rates, inflation, and labor markets. It makes sense. The disconnect between the stories the Fed officials are telling and the one the market seems to be sketching makes for a mesmerizing experience akin to staring into a campfire. It is hard to look away. One of these parties will have to be wrong, but which one?
Larry Summers, former Secretary of the Treasury, recently said, “It’s as difficult an economy to read as I can remember.” To cut to the chase: we would retweet that sentiment. Jerome Powell, Federal Reserve Chair, has practically all but said “READ MY LIPS: NO RATE CUTS.” And yet, investors seem to have a different vision for how the year ahead plays out. One could imagine that we’re all reading effectively the same economic data, but the data itself is a mixed bag, and interpretation of the data (and the importance of each piece) leaves a lot of room for divergence of opinion as well. You’ve probably heard many times by now that the Fed is aiming for a soft landing. What exactly does that mean? It means
“Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month or a year from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So, if you wait for the robins, spring will be over.” – Warren Buffett in the Fall of 2008
When each of us became an investor, whether we realized it or not, we entered into a deal of sorts with the market. It wasn’t a contractual obligation per se; it was more like a handshake deal with a friend we’ve known for many, many years. We trusted that based on our friend the market’s past behavior (since the 1920s, if you’re referring to the chart below), we had no reason to believe our friend the market would not keep up its end of the deal: to deliver us a return on our investment over the long haul. But in order for the market to do so, we needed to uphold our end of the bargain which was to not throw in the towel early; to not give up on it, despite it weaving off course at times. The handshake deal we entered is just that: we will get a return on our investment if we don’t cut the deal short. When the going gets rough, we have two very important things to rely on: trust and history. And therefore, in order to be fit for investing in the market, we need to in fact be people who are willing to rely on both and, therefore, uphold our end of the deal.
With another volatile week nearly behind us, I think it’s worth revisiting some words I penned at the beginning of this year about my time in the US Army’s Ranger School.
When GDP growth slows and extreme volatility plagues the market, we are often confronted with a familiar question…are we headed for a recession or are we already in one? The usual definition of a recession may make it seem clear-cut: two consecutive quarters of contracting GDP. However, to the “recession referees” of the National Bureau of Economic Research’s Business Cycle Dating Committee, the real definition is a little more nuanced.
In 2009, Jon Stewart interviewed Jim Cramer, the famous CNBC financial news commentator (first portion of the interview is here). When Stewart pressed him on his contradictory and often erratic antics Cramer said, “Look, we’ve got 17 hours of live TV a day to do.” Just think about that for a moment. 17 hours of live TV to fill! In between gold and crypto commercials, they have a 17-hour void to fill that bridges the gap between news, entertainment, and some actual financial analysis.
The start to this year has been anything but smooth for the stock and bond markets. With interest rates on the rise and inflation running amok, some investors have questioned where the bubbles are located. Crypto and profitless tech companies have already had their bubbles respectively pop. One area some investors have questioned is real estate. Are we in fact in a major real estate bubble?
How will I behave in combat? This a question I asked myself countless times before my first deployment to Afghanistan. As a young officer who performed well in training, I thought I had the foundation to do well, but there really isn’t a substitute for the real thing. Some things must be experienced before they are truly understood. A tough training scenario can recreate the sounds and chaos of combat, but it can’t recreate the emotions. No matter how stressful the training event, it’s still just that, a training event. There may be notional casualties, but actual Americans aren’t bleeding
Market Insight: Focus on the Foundation Dylan Potter, CFP®, Vice President, Wealth Manager There are all kinds of combat tactics. Every segment of war, whether it’s on land, sea, or air, has tactics and techniques that are specific to that venue. However, at the point of execution – that moment when you engage with the enemy – the best tactics in the world will not make you successful if you haven’t put in the weeks, months, and years of training it takes to prepare for that unforgiving minute. You need the foundation.In training, it was our goal to push ourselves so
